-The above figure shows Bob's utility function.He currently has $100 of wealth,but there is a 50% chance that it could all be stolen.Bob is
A) risk averse.
B) risk neutral.
C) risk loving.
D) risk premium.

Question

-The above figure shows Bob's utility function.He currently has $100 of wealth,but there is a 50% chance that it could all be stolen.Bob is
A) risk averse. 
B) risk neutral. 
C) risk loving. 
D) risk premium.

Quizplus · Accepted Answer

Bob's utility function, which reflects his preferences over different levels of wealth, indicates he is risk averse if the utility of his expected wealth is less than the expected utility of his wealth under uncertainty. Since the problem implies concern over potential loss, it suggests risk aversion, as risk-averse individuals prefer certainty and are willing to sacrifice potential gains to avoid losses.

-The Above Figure Shows Bob's Utility Function